Global operating rates weaken

The chemical industry is a well-known leading indicator for the global economy. This is because our products are used in so many applications around the world.

The above chart of global capacity utilisation, from the American Chemistry Council, paints a subdued picture. In May, capacity utilisation was actually lower than in May last year, at 87.3% versus 87.5%.

This is further confirmation that Q1′s excellent results were based on supply shortages, not demand increases.

Readers may also remember the chart from the blog’s January White Paper, Budgeting for Uncertainty. It highlighted the key question addressed in the White Paper, namely ‘What Happens Next?’:

“Will the recovery of the past 18 months continue, and take OR% back above the 90% level that would indicate things were really back to ‘normal’? Will they stabilise at current levels? Or will they slip back, as governments cut back on stimulus programmes and move towards an ‘austerity’ diet of lower spending and higher taxes?”

As we start H2, it seems fairly clear that we are not headed back above the 90% level. If we are lucky, they may stabilise. But the risk they may slip back, is now far too high for comfort.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. Paul is also an invited member of the World Economic Forum’s Global Agenda Council. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry.

The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts.

Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.